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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The total quantity - or total output of a good produced at each quantity of labor employed
Law of Demand
Total Product of Labor (TPL)
Marginal tax rate
Implicit costs
2. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Marginal Cost (MC)
Economic Profit
Marginal Productivity Theory
Luxury
3. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Consumer surplus
Constrained Utility Maximization
Constant cost industry
Marginal Cost (MC)
4. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Price floor
Cross-Price Elasticity of Demand
Average Total Cost (ATC)
Perfect competition
5. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Natural Monopoly
Long Run
Marginal Productivity Theory
Accounting Profit
6. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Economic Profit
Resources
Monopsonist
Cartel
7. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Production function
Derived Demand
Profit Maximizing Resource Employment
Luxury
8. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Subsidy
Complementary Goods
Monopoly long-run equilibrium
Price Ceiling
9. The price of a good measured in units of currency
Perfectly inelastic
Explicit costs
Absolute prices
Short run
10. When firms focus their resources on production of goods for which they have comparative advantage
Perfectly competitive long-run equilibrium
Specialization
Variable inputs
Marginal Benefit (MB)
11. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Subsidy
Total Fixed Costs (TFC)
Normal Profit
Constant Returns to Scale
12. A good for which higher income decreases demand
Positive externality
Constant Returns to Scale
Inferior Goods
Shutdown Point
13. ATC = TC/Q = AFC + AVC
Market power
Average Total Cost (ATC)
Complementary Goods
Public goods
14. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Income Elasticity
Economics
Substitute Goods
Decreasing Cost industry
15. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Private goods
Determinants of Labor Demand
Marginal tax rate
Cartel
16. The output where ATC is minimized and economic profit is zero
Producer surplus
Public goods
Break-even Point
Monopsonist
17. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Total Fixed Costs (TFC)
Four-firm concentration ratio
Inferior Goods
Monopoly long-run equilibrium
18. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Excise Tax
Constant cost industry
Scarcity
19. The ability to set the price above the perfectly competitive level
Excess Capacity
Economic Profit
Market power
Long Run
20. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Economic Growth
Non-collusive oligopoly
Law of Diminishing Marginal Utility
Productive Efficiency
21. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Demand for Labor
Private goods
Determinants of Demand
Excise Tax
22. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Economic Profit
Least-Cost Rule
Unit elastic demand
Allocative Efficiency
23. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Oligopoly
Law of Increasing Costs
Shortage
Perfect competition
24. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Shutdown Point
Incidence of Tax
Increasing Cost Industry
Constant cost industry
25. Ed = (%dQd)/(%dP). Ignore negative sign
Negative externality
Average Variable Cost (AVC)
Shortage
Price elasticity
26. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Product of Labor (MPL)
Relative Prices
Resources
Decreasing Cost industry
27. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopoly
Relative Prices
Marginal Cost (MC)
Spillover benefits
28. AVC = TVC/Q
Profit Maximizing Resource Employment
Determinants of Supply
Average Variable Cost (AVC)
Incidence of Tax
29. Exists if a producer can produce a good at lower opportunity cost than all other producers
Luxury
Comparative Advantage
Law of Increasing Costs
Production function
30. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Public goods
Unit elastic demand
Average Product of Labor (APL)
Necessity
31. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Marginal Revenue Product (MRP)
Cartel
Surplus
Market power
32. Ed < 1
Total Revenue Test
Negative externality
Price inelastic demand
Income Elasticity
33. Ei = (%dQd good X)/(%d Income)
Income Elasticity
Law of Demand
Allocative Efficiency
Negative externality
34. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Luxury
Excess Capacity
Constant Returns to Scale
Economic Growth
35. Ed = 1
Private goods
Unit elastic demand
Perfectly inelastic
Diseconomies of Scale
36. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Surplus
Explicit costs
Profit Maximizing Resource Employment
Public goods
37. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Productive Efficiency
Allocative Efficiency
Spillover benefits
Absolute Advantage
38. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Determinants of elasticity
Cross-Price Elasticity of Demand
Marginal Productivity Theory
Positive externality
39. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Resources
Constant Returns to Scale
Spillover benefits
Implicit costs
40. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Implicit costs
Income Effect
Relative Prices
Price elastic demand
41. Ed > 1 - meaning consumers are price sensitive
Least-Cost Rule
Economic Profit
Price elastic demand
Income Elasticity
42. AFC = TFC/Q
Average Total Cost (ATC)
Total variable costs (TVC)
Average Fixed Cost (AFC)
Constant Returns to Scale
43. The difference between total revenue and total explicit costs
Marginal Product of Labor (MPL)
Necessity
Determinants of Labor Demand
Accounting Profit
44. The practice of selling essentially the same good to different groups of consumers at different prices
Price discrimination
Absolute prices
Positive externality
Consumer surplus
45. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Free-Rider Problem
Shutdown Point
Opportunity Cost
Perfectly competitive long-run equilibrium
46. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Price inelastic demand
Excise Tax
Marginal Cost (MC)
Productive Efficiency
47. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Normal Profit
Determinants of Supply
Price inelastic demand
Constrained Utility Maximization
48. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage
Marginal Resource Cost (MRC)
Utility Maximizing Rule
Implicit costs
Opportunity Cost
49. The difference between total revenue and total explicit and implicit costs
Demand for Labor
Economic Profit
Excise Tax
Monopolistic competition
50. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Normal Profit
Constrained Utility Maximization
Negative externality
Cartel